Russia hits back over US sanctions warning

Russia stepped up pressure on the West over the Ukraine crisis on Friday, warning the United States against imposing sanctions and threatening to cut off gas supplies to Ukraine, while maintaining that it hoped to avoid a new Cold War.

In a phone conversation with US Secretary of State John Kerry on Friday, Russia’s Foreign Minister Sergei Lavrov “warned against hasty and reckless steps capable of causing harm to Russian-American relations, particularly ... sanctions, which would inevitably hit the United States like a boomerang,” the foreign ministry said.

Lavrov’s comments came after US President Barack Obama announced targeted sanctions against Russia on Thursday, ordering visa bans and asset freezes on unnamed individuals, who have been deemed responsible for threatening Ukraine’s sovereignty in its Crimea region.

Meanwhile, Russian President Vladimir Putin’s spokesman Dmitry Peskov defended Russia’s actions in Ukraine, but added he hoped that a new Cold War would not break out despite “extremely deep disagreements”.

“There still remains hope ... that some points of agreement can be found as a result of dialogue - which our partners, thank God, have not yet rejected,” Peskov said.

The remarks, broadcast on one main state channel while another showed the Paralympic Games opening ceremony in Sochi, appeared to be part of an effort by Putin to avoid a major confrontation with the West while giving no ground in the dispute over Ukraine.

On Saturday, however, Moscow said it was considering freezing foreign military inspections of its arms arsenal – an effort which is in line with the Strategic Arms Reduction Treaty (START) with the United States and the Vienna Document between Organisation for Security and Cooperation in Europe (OSCE) member states.

"The unfounded threats towards Russia from the United States and NATO over its policy on Ukraine are seen by us as an unfriendly gesture that allows the declaration of force majeure circumstances," a high-ranking defence ministry official, who was not named, said in a statement to all Russian news agencies.

Gazprom issues warning

On Friday, Russia’s state-owned energy company Gazprom issued a thinly veiled warning that it could stop shipping gas to Ukraine over unpaid bills, increasing pressure on the new government in Kiev and its supporters in Europe, which gets half of its Russian gas through Ukraine.

“Either Ukraine makes good on its debt and pays for current supplies, or there is risk of returning to the situation of early 2009,” Gazprom CEO Alexei Miller said.

Gazprom halted gas supplies to Ukraine over unpaid bills at the beginning of 2009, which led to reductions in supplies of Russian gas to Europe during a cold winter. The issue was eventually resolved after Ukraine’s contract with Gazprom was revised and a deal was made allowing Russia’s Black Sea naval fleet to remain at base in Crimea.

In December, Russia had agreed to cut gas prices for Ukraine to $268.50 per 1,000 cubic metres from around $400, as part of a financial aid agreement. But Putin and Gazprom have since said that Russia will abandon the price discounts for Ukraine as of April because Kiev has failed to pay for gas on time.

“Today, March 7, was the deadline for payments for gas supplies to Ukraine in February. Gazprom has not received payments for the debt,” Miller said, adding that Ukraine’s overdue gas debt to Russia now stands at $1.89 billion.

“Essentially, this means that Ukraine has stopped paying for gas. This totally contradicts the provisions of the contract and international trade practices. For our part, we have always fulfilled and will fulfill our contractual obligations,” Miller said. “But we cannot supply gas free of charge.”

Last year, Gazprom supplied the European Union and Turkey with 162 billion cubic metres of gas, a historic record, of which 86 bcm went via Ukraine.

The company has been cutting gas supplies to Europe via Ukraine as it has built a pipeline called Nord Stream under the bed of the Baltic Sea directly to Germany. It also plans to build the 63 bcm a year South Stream pipeline via the Black Sea to Europe.